Microsoft beats profits after raising its office prices; Stock jumps after strong expectations 2022-04-26 15:14:00


Microsoft Corp beat earnings and sales estimates and produced stronger-than-expected revenue across all of its business segments in an earnings report on Tuesday, and shares jumped after CEOs’ expectations also beat their estimates.


It reported fiscal third-quarter earnings of $16.73 billion, or $2.22 per share, up from $2.03 per share a year ago. Revenue increased to $49.36 billion from $41.71 billion in the same period last year. Analysts, on average, expected earnings of $2.19 per share on sales of $49 billion, according to FactSet.

Microsoft shares fell more than 2% in after-hours trading immediately after the results were released, but then rebounded to slight gains in a choppy move before receiving a significant boost from expectations delivered during a conference call later. Shares last rose more than 5% in the extended session. The stock closed 3.7% lower at $270.22.

Microsoft’s software business increased sales by more than $2 billion after the company dramatically raised prices across the board on its popular Office 365 family of products for the first time since moving to its cloud offering a decade ago. Sales in the “Productivity and Business Solutions” segment increased to $15.79 billion from $13.55 billion a year ago, while analysts averaged $15.75 billion, according to FactSet.

Office 365 price increase, announced last yearwas supposed to go into effect at the beginning of March, but the company Latest price hike for some customers. Jefferies analysts noted that customers may have jumped in to keep prices low by signing new deals before a price increase, which would be a boon for the third quarter, but could affect the company’s outlook for the rest of the year.

“The office may have benefited from the drawdown as the rate increases took effect on March 1, as some customers may have renewed service before the increase. This strength could be a potential risk to Office to the upside for the rest of this calendar year,” he wrote. Analysts in the April 18 note, maintaining a buy rating and a $400 target price.

Amy Hood, Microsoft’s chief financial officer, guided software sales for the fiscal fourth quarter from $16.65 billion to $16.9 billion, while analysts estimated $16.68 billion, indicating that any weakness will not be felt in the current quarter.

Microsoft’s most profitable segment is “smart cloud,” which includes the Azure cloud computing product as well as sales of servers and other on-premises products. The cloud segment posted revenue of $19.05 billion, up from $15.19 billion a year ago, while analysts averaged $18.89 billion. Microsoft said Azure revenue increased 46%. The company does not generate revenue specific to Azure, despite competitors Inc.

and Alphabet Inc.


The country’s sales of its competitive platforms, Amazon Web Services and Google Cloud, respectively.

Microsoft’s “most personal computing” segment grew to $14.52 billion in sales from $13.04 billion a year ago, despite fears the pandemic boom in PC sales is over. Analysts have forecast sales of $14.3 billion on average, and forecasts for the fourth quarter suggest slower growth in the sector is looming.

Hood’s forecast called for fourth-quarter revenue of $52.4 billion to $53.2 billion, while analysts had expected $52.75 billion. After forecasts were delivered, stocks jumped, Like they did three months ago.

Microsoft shares are down 19.7 percent so far this year, as are the S&P 500

9.9%. The drop puts Microsoft at risk of dropping below $2 billion in market value for the first time since June 2021, according to FactSet data; At closing price, Microsoft had a valuation of about $2.03 trillion.